Is NC Local Government retirement still tax deductible in NC?

[nctaxed]

Is Local Government retirement still tax deductable in NC? Why isn't it on the questions? If I have to hire someone to get it right, I want my money back!!!!! I have military SBP and LGERS retirements and Turbotax gives ZERO instructions or help! Even when using walk me through it. WHY?

[PattiF]

To take advantage of the Bailey Exemption you need to confirm that the NC distribution amount on the 1099-R is not empty. It should be the amount in box 2a, or the taxable amount in Box 1 if Box 2a is empty or undetermined. If the NC distribution amount is blank or zero, there is nothing to subtract from North Carolina income.

Go back to the "Income" tab and "Edit" the 1099R.  After confirming the form entries, there will be a follow on question for NC residents that asks if the distribution is part of the Bailey Settlement.  You would need to select "Yes." 

After completing the Federal Interview return to the NC state interview.  Click through the initial pages and you will arrive at the page titled "Here's the income NC handles differently."  The Bailey deduction should show at the top of that page with a button allowing you to edit if needed.

[nctaxed]

No that is wrong.  The SBP is Bailey settlement.  The LGERS is normal state retirement and should qualify for $4000 deduction as well but Not Bailey (which would deduct all).  So where on the forms do I mark the correct boxes for these two separate things to show up properly?

[ErnieS0]

Code your North Carolina Local Governmental Employees’ Retirement System, (LGERS) pension as Bailey settlement retirement benefits to get your $4,000 deduction. This is because NC designated several LGERS pensions as qualifying under the terms of the Bailey settlement.

Since the October 7, 1998 order approving the settlement, the Court has issued several orders resolving questions about refund eligibility. In an Order Regarding Class Definition signed by Judge Thompson on November 20, 1998, the following retirement systems were designated as a "North Carolina state or local governmental retirement system:"

• North Carolina Teachers' and State Employees' Retirement System (G.S. 135, Article 1)
• North Carolina Local Governmental Employees' Retirement System (G.S. 128, Article 3)
• North Carolina Consolidated Judicial Retirement System (G.S. 135, Article 4)
• North Carolina Legislative Retirement System (G.S. 120, Article 1A)
• North Carolina Disability Income Plan (both short-term and long-term disability benefits) (G.S. 135, Article 6)
• North Carolina Supplemental Retirement Income Plan (G.S. 135, Article 5)
• North Carolina Supplemental Retirement Income Plan for State Law Enforcement Officer (G.S. 143-166.30(d))
• North Carolina Deferred Compensation Plan (G.S. 143B, Article 9)
• North Carolina National Guard Pension Fund (G.S. 127A-40)
• North Carolina Sheriffs' Supplemental Pension Fund (G.S. 143, Article 12H)
• North Carolina Registers of Deeds' Supplemental Pension Fund (G.S. 161, Article 3)
• North Carolina Supplemental Retirement Plan for Local Governmental Law Enforcement Officer (G.S. 143-166.50(e))
• North Carolina Firemen's and Rescue Squad Workers' Pension Fund (G.S. 58, Article 86)
• Charlotte Firefighters' Retirement System (Session Laws 1947, Chapter 926, § 6(c))
• Firemen's Supplemental Fund of Hickory (Session Laws 1971, Chapter 65)
• Winston-Salem Police Officers' Retirement System (Session Laws 1939, Chapter 296)

In addition to the local plans listed in the table above, there may be other plans created by local governments pursuant to State authorization that enjoyed a tax exemption prior to 1989 pursuant to G.S. 105-141(b)(13) but have not been identified by the Court at this time. Retirement benefits from these plans are also exempt from income tax if the retiree is "vested."

The Court has not identified optional retirement programs for employees of State institutions of higher learning (Internal Revenue Code § 403(b), including TIAA-CREF) as a qualifying State or local retirement system. If the Court identifies these plans as a qualifying State or local retirement system, the Department will issue a supplementary Directive explaining the Court's decision.

See: Directive PD-99-1.

[nctaxed]

When I add the LGERS as Bailey it deduct ALL not $4000.  That is not right.

[DMarkM1]

The only options for a retirement pension benefit deduction in NC are local/federal government vested before August 1989 under the Bailey Settlement or military retiree or SBP payments.  

So for your SBP  form 1099R you would select the military retiree option to exclude that pay.  

If your local government retirement does not meet the Bailey settlement tests then you would select "None of the above" and none of that 1099R would be deductible.  

Click here for the instructions for NC form D-400.  Extraction below is found on pages 19 and 20.   

Line 20. Retirement Benefits Received by Vested N.C. State Government, N.C. Local Government, or Federal Government Retirees, i.e. Bailey Settlement.  The exclusion applies to retirement benefits received from certain defined benefit plans, such as the North Carolina Teachers’ and State Employees’ Retirement System, the North Carolina Local Governmental Employees’ Retirement System, the North Carolina Consolidated Judicial Retirement System, the Federal Employees’ Retirement System, or the United States Civil Service Retirement System, if the retiree had five or more years of creditable service as of August 12, 1989. 

The exclusion also applies to retirement benefits received from the state’s §401(k) and §457 plans if the retiree had contributed or contracted to contribute to the plan prior to August 12, 1989. The exclusion does not apply to local government §457 plans or to §403(b) annuity plans. 

Line 21. Certain Retirement Benefits Received by a Retired Member of the United States Uniformed Services Not Deducted on Line 20. A retired member of the United States Uniformed Services or their eligible beneficiary may deduct the following

• Uniformed Service retirement payments received by a retired member who served at least 20 years in the Uniformed Service or who was medically retired from the Uniformed Service. 

• Payments from the Survivor Benefit Plan to a beneficiary of a retired member who served at least 20 years in the Uniformed Services or who was medically retired from the Uniformed Services. 

[SteamTrain · Accepted solution]

@nctaxed 

 IF it is not eligible for the Bailey settlement, and is NOT an actual Military retirement...then you would choose None of the above.

__________

I spent the last hour looking it up.

The $4,000 deduction was eliminated starting waaaaay back in the 2014 NC tax return.

The software properly eliminated it starting in that year's tax return...(And I have back to 2013 installed, where it was available for that year)

______

ANNND, if you look for and download the actual NC D-400 Instructions for that year (the D-401 PDF) at the NCDOR website....the What's New on page 4 says:

"Deduction for Other Retirement Benefits. There are no longer deductions
available to certain taxpayers for up to $4,000 for federal, state, or local
government retirement benefits or up to $2,000 for private retirement benefits"

[nctaxed]

not exactly what I wanted to hear but really appreciate the diligence it took to find this information.  I could not find it myself.  Thank you